China Yangtze Power, which owns and operates the power plant of the 160-billion-yuan Three Gorges Dam Project, is preparing to issue the first corporate bond in China, a source said.

Several other fast-growing companies listed on the Shanghai and Shenzhen bourses are also making preparations to raise fresh capital directly from investors through bond issues, market sources said.

Their enthusiasm to tap this new source of capital was triggered by the China Securities Regulatory Commission's announcement in June that it had begun drafting rules on corporate bond issues. Until now, only a handful of State-owned enterprises had been allowed to issue bonds approved by the National Development and Reform Commission.

"The launch of corporate bonds would help encourage the issuing companies to improve their operations and management because the cost of raising capital in the bond market is largely based on the asset values and the credit ratings of the issuing companies," said Lian Mengke, a bond analyst with Haitong Securities in Shanghai.

China Yangtze Power, the country's leading power generating company, based in Yichang of Central China's Hubei Province, is reportedly planning to issue bonds totaling 8 billion yuan. Further details of the issue remain unavailable.

"We are in the preparation stage and things change all the time," said the source. "There's nothing more I can say at this time."

Bond experts and analysts said corporate bonds would create a more liquid long-term capital market that can better reflect the true cost of capital. The introduction of corporate bonds would help bring yields more in line with market forces.

Nie Wen, an analyst with Industrial Securities, said the launch of corporate bonds would allow more domestic companies to gain access to the long-term capital market.

(China Daily August 1, 2007)